| Exchange Traded Funds (ETFs) and options on ETFs | | | | BRK/B - 6.34% |
| have exploded in popularity in recent years. They | | | | FXO- Top 10 Holdings are 14.51% of assets. |
| offer securities that trade like stocks but are | | | | Top 3 Holdings: |
| micro-focused in almost every sector in the markets | | | | WRB - 1.85% |
| (including international, commodity, short, ultra short, | | | | AWH - 1.6% |
| etc.). But there can be a great difference in the | | | | PRE - 1.47% |
| holdings, diversification and trade strategy of ETFs, | | | | PFI - Top 10 Holdings are 25.73% of assets. |
| even within one particular sector. | | | | Top 3 Holdings: |
| For example, let's take a look at ETFs in the Financial | | | | AMP - 3.12% |
| Sector. There are many ETFs that track this group, | | | | MET - 2.85% |
| not even including the short and ultra short ones. | | | | UNM - 2.71% |
| Among the group of Financial ETFs include iShares | | | | Now, all ETFs have different rules regarding |
| S&P Global Financials (IXG), iShares Dow Jones | | | | re-balancing of holdings, discretion of holdings, focus, |
| U.S. Financial (IYF), iShares Dow Jones U.S. Financial | | | | etc -- and some are more liquid than others, both in |
| Services (IYG), Financial Select Sector SPDR (XLF), | | | | stock and option volume. Recent massive market |
| Vanguard Financials (VFH), Rydex S&P Equal | | | | capitalization changes in individual stocks have |
| Weight Financials (RYF), PowerShares FTSE Rafi | | | | certainly made an impact of the relative weightings |
| Financials (PRFF), First Trust Financials AlphaDEX | | | | of holdings in this sector, as well. |
| (FXO), and PowerShares Dynamic Financials (PFI). | | | | But certainly the active investor would be wise to |
| This list does not even include International, Bank, | | | | know what they are buying when they invest or |
| Insurance, Preferred, Short, Ultra and other types of | | | | trade in one of these ETFs or the options on them. |
| Financial related ETFs. | | | | For example, the likes of IYG, XLF, and PRFF have |
| Let's examine the diversification and top holdings of | | | | around 50% of their holdings in their Top 10 Assets |
| the above mentioned ETFs (all data from Yahoo | | | | -- meaning they are not very diversified. In addition |
| Finance). | | | | on IYG for example, around 25% of the holdings are |
| IXG - Top 10 Holdings are 24.44% of assets. | | | | in JPM and WFC alone (based on the data utilized |
| Top 3 Holdings: | | | | above) ... so the performance of that ETF will be |
| JPM - 4.3% | | | | greatly affected by just 2 securities. In one way |
| HSBC - 4.25% | | | | you could say that is much more risky, but from |
| WFC - 2.58% | | | | another perspective you could view that as getting |
| IYF - Top 10 Holdings are 37.91% of assets. | | | | more "bang for the buck". |
| Top 3 Holdings: | | | | Then there are the very diversified ETFs, some of |
| JPM - 10% | | | | which attempt to equal-weight -- such as RYF and |
| WFC - 5.58% | | | | FXO, where the Top Holdings comprise about 15% |
| GS - 4.28% | | | | of assets and the top holdings are around 2% of |
| IYG - Top 10 Holdings are 57.68% of assets. | | | | assets. |
| Top 3 Holdings: | | | | In the current market environment, we have seen |
| JPM - 15.7% | | | | many sectors move "en masse" quite a bit -- more |
| WFC - 8.76% | | | | than what is normally the case. So these ETFs may |
| GS - 6.72% | | | | also move as a group -- and also remember that |
| XLF - Top 10 Holdings are 51.15% of assets. | | | | supply & demand is a big factor in ETF |
| Top 3 Holdings: | | | | performance, because they trade as stocks, not on |
| JPM - 12.34% | | | | the actual value of their assets. But as the market |
| WFC - 10.34% | | | | settles down into more of a "stock picking" |
| BAC - 5.45% | | | | environment and if arbitrage-type discrepancies are |
| VFH - Top 10 Holdings are 36.86% of assets. | | | | seen in various ETFs vs. individual stocks, etc (as has |
| Top 3 Holdings: | | | | been seen recently in preferred vs. common, |
| JPM - 8.2% | | | | closed-end funds, etc) ... then you may begin to see |
| WFC - 7.26% | | | | more price performance disparity in ETFs based on |
| BAC - 5.02% | | | | their holdings and diversification. |
| RYF - Top 10 Holdings are 17.01% of assets. | | | | The bottom line is that when one is looking at |
| Top 3 Holdings: | | | | investing in or trading an ETF or options on an ETF, |
| SLM - 2.15% | | | | you should examine the holdings, structure, and goals |
| MS - 1.92% | | | | of the ETF to see which one most matches the |
| FII - 1.78% | | | | expectations (short or long term) you have for that |
| PRFF - Top 10 Holdings are 48.19% of assets. | | | | sector. |
| Top 3 Holdings: | | | | Click here to receive BigTrends articles and blogs |
| JPM - 11.15% | | | | directly to your email. |
| WFC - 8.59% | | | | |